I have been asked by a number of people, from MPs onwards, to prepare answers to the types of questions being commonly asked about the economy in the Covid era. I can’t see why these things shouldn’t be shared. This thread provides some suggestions.
Should we raise taxes to pay for Covid 19?

Right now, definitely not. We’re facing an economic downturn in 2021. Almost nothing can prevent it. And increasing taxes will take more tax out of the economy, and make the town turn worse. So definitely don’t raise taxes now.
Does that mean we don’t need any tax changes?

No, it doesn’t, but overall taxes mustn’t increase. Tax the wealthy more then, and reduce tax for the poorest. That increases overall spending power in the economy because those least well off spend all their income. But that’s it.
So what taxes could increase?

Capital gains tax could be increased to income tax rates. Corporation tax for large companies could be 25%. Tax reliefs on pensions for higher rate taxpayers could be reduced. We could tax investment income more. Increase council tax at the top end.
What taxes could go down for the low paid?

National insurance would be a good place to start. Cancel council tax for those on benefits. Reduce council tax for low rate rate bands. Free BBC licence fee for those on benefits. Think laterally, in other words.
Do we need to repay the national debt?

No, of course not. Firstly, we’ve only repaid tiny amounts since WW2 and nothing since 2001. So why start repaying now? And why do it anyway? The owners of the national debt want to own it. So why force them to sell it when they it?
Any other reasons not to repay national debt?

Yes. £200bn is National Savings. £400bn has foreign owners. £800bn is owned by the Treasury and can’t be repaid. The rest is owned by pension funds, banks and the finance sector. Why force them to sell? It makes no sense.
So any other reason to leave debt as it is?

Many. Like, it’s never been cheaper, which is what really matters. And to repay the debt requires either more tax or cuts in gov’t spending and both reduce demand in the economy - and we will need all the demand we can get in 2021.
Should we in fact be spending more?

Of course. The NHS is underfunded. So is care. Education and justice are at their limits. But most of all we need the government to lead investment in a sustainable economy for the UK. Why not spend more when there’s so much need?
What does investing in a sustainable economy look like?

It is about making the UK’s 30 million buildings energy efficient. Triple glazing. Insulation. New boilers. Heat pumps. And solar power. All done street-by-street by a mass of newly trained people to do the job.
What else do we need to invest in?

New carbon neutral housing. Research into new transport solutions. More efficient wind, solar and tidal power. Better, safer agriculture. New energy grids. Real high speed broadband. And critically, business systems to deliver all this.
But we’re already in debt. How do we pay for this?

First, people are queueing up to save with the government. Why don’t we let them? Second, let’s change the tax incentives on pensions and ISAs to drive money to green investment. And if that is not enough then, there is QE.
What changes to tax incentives?

Require pension funds invest 25% of all new contributions in programmes creating green jobs in exchange for tax relief. Ensure ISAs can only be saved in government backed green bonds - to be used to deliver the transformation this country needs.
Why QE? Haven’t we had enough of that already?

QE is simply the Bank of England creating new money for the government to spend. So long as there is unemployment this can be done with no risk of inflation. So we can have all the money required to invest in the transition we need.
But haven’t we already maxed out the credit card?

This claim is absurd. It assumes the government’s like a household. It isn’t. Unlike households, governments can create money, without limit. So they can always pay their bills. There is no credit card. And there is no limit.
So we can create money forever?

No. There is a limit. It’s full employment. That’s the constraint. Money is not. So at full employment spending has to stop. But that’s why the aim should be to create a wide variety of jobs in every constituency. Think small to deliver big.
There will be more of these. But these will do for starters. And of course each is just a framework for an answer. But there’s never a reason, however short the time available, to not argue for the economy we need.

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More from @RichardJMurphy

28 Nov
I’ve tweeted more about quantitative easing than I really thought to be decent of late. However the questions still keep coming, so here is another QE thread, on the use of QE funds and (especially) the link to the Green New Deal.....
The question I have been asked is does it matter what QE money is spent on, and the honest answer is ‘it’s complicated’. But, maybe not so so complicated if it’s understand that QE came in three stages, each of which is quite different.
Stage 1 QE lasted from 2009 until 2016, when the last round of this stage took place in the UK. The aim at this stage was simple. As always, new money was created by the Bank of England, and mainly government bonds (gilts) were bought. That’s what QE does, in essence.
Read 21 tweets
23 Nov
There is an obsession that the national debt must be repaid. Assuming it is properly calculated (and I have real doubt about that) it’s coming on for £2,100 billion. Knowing what makes this up is really important. Then we can decide if we really want to repay it. Stay with me….
Around £200bn of the national debt is made up of National Savings & Investments. That's things like Premium Bonds and the really safe savings accounts older people tend to appreciate. So why do we want to force these people into riskier savings accounts? I don't think we do.
Around £400bn of the national debt is owned by foreign gov'ts. That's cool: they want to fund us. They do that because they want to hold our currency. That's because that helps them trade with the UK. Would we want to force them to take their money back in that case? I doubt it.
Read 9 tweets
22 Nov
There’s massive misunderstanding about what QE is and what it does. So please forgive a long thread on one of the most important tools used in modern economics, which if used properly might provide real hope for a better future.
Outside Japan QE was unknown until 2009. Since then the UK has done £845 billion of it. This is a big deal as a consequence. But as about half of that has happened this year it’s appropriate to suggest that there have been two stage of QE, so far. And I suggest we need a third.
Stage 1 QE started in 2009 and was last used in 2016. It created £445bn of new money. That was used to buy £435bn of government bonds, or gilts, and £10bn of corporate bonds, which we can ignore. There were three goals to first stage QE.
Read 68 tweets
15 Nov
Rarely has the UK faced an existential crisis like the one it does at this moment. The relationships between its member nations are uncertain. We face meltdown with the EU, even if we get a deal. And the special relationship with the US is anything but that. This is unprecedented
What has now happened in this mess? The architects of it, secure in the knowledge that the damage they sought to create has been delivered and their consulting futures are secure, have walked out of government. Is that by chance? No. It’s deliberate distraction.
The Brexiteers aim has always been apparent. It has been to maximise the chance of disruption. That’s because they believe financial capitalism works best in such conditions. And they are right. Moments of chaos are times when hedge funds have greatest chance of making money.
Read 13 tweets
5 Nov
The government is going to do £450bn of quantitative easing (QE) this year. That should more than cover its total borrowing fir the year, meaning the actual sum owed to third parties will fall, and so will real national debt as well as a result. 1/-
Saying this, I know that much of the new money created by the Bank of England to fund QE ends up back on central bank reserve accounts held by U.K. High Street banks and building societies with the Bank of England. And that interest is paid on their balances 2/-
The interest paid in those balances is 0.1%. That rate is controlled by the Bank of England, and will not be changing for a long time to come. In effect then the government is paying banks and building societies 0.1% to make them hold new money that cancels the national debt 3/-
Read 9 tweets
29 Oct
In the summer of 2015 Jeremy Corbyn used a pile of my ideas to help him become Labour leader. By spring 2016 his team were telling me they were sitting out Brexit as it was just a Tory fight. 1/
At that moment I knew this was a man who played politics, and not political leadership, and I walked away from any association. I did not regret it. Whatever he said, or was said for him, he was always posturing 2/
Politics is about tough decisions. About finding the way to real answers. There is a lot Labour is still getting very wrong, on Covid, the economy, electoral reform and more. But Corbyn was never the answer on any of those issues either 3/
Read 6 tweets

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